Florida District Court Rejects ERISA Claims Premised on Alleged FLSA Violations

by BakerHostetler

Plaintiffs in most class and collective actions try to plead their claims in such a way as to exert the maximum pressure against the employer. In some instances, that raises the issue of whether the plaintiff should assert one, clear claim or several.  Having only one claim places the issues more starkly, but oftentimes plaintiffs will try to hedge their bets by asserting multiple claims.

On occasion, we see plaintiffs try to buttress FLSA collective claims with allegations that the employer has, by virtue of its non-payment of overtime or wages, violated various ERISA provisions. Such a strategy is fraught with issues as a recent decision from the Middle District of Florida.

In Lytle v. Lowe’s Home Centers, Inc., Case No. 8:12-cv-1848-T-33TBM (M.D. Fla. Apr. 29, 2014), the plaintiffs brought a collective action against the Lowe’s home improvement chain contending that it had misclassified its local human resource managers as exempt from overtime. These claims were interesting in and of themselves – while claims by store managers and assistant managers are common in the retail industry, we don’t often see such claims coming out of the human resources department itself.

In any event, the initial complaint stated claims solely under the FLSA, and the district court conditionally certified an FLSA class. Prior to the court’s order granting conditional certification, the plaintiff amended her complaint to allege a series of ERISA claims for claimed record keeping violations, catchall relief, breaches of fiduciary duties, and a declaration of their future benefit rights under the company’s 401k plan. The defendant moved to dismiss.

The court found that none of the ERISA claims was viable. If you don’t care for the specific reasons as to each of the four counts, the punch line is that the claims were either not supported by the plan’s terms, or could not be brought under ERISA’s terms, and you are free to skip over the next four paragraphs.

As to the record-keeping violations (premised on ERISA section 209(a)(1), 29 U.S.C. § 1059(a)(1)), the claim essentially was one that the employer failed to keep sufficient time records for overtime purposes, and thus also failed to maintain accurate records for purposes of ERISA as well. The court rejected this argument on two grounds. First, the plan was based on actual wages received, not those payable, and thus the employer had not failed to keep any records required by the plan. While such provisions are common and would defeat ERISA record-keeping claims in many cases, the court also concluded that there was no private right of action for record-keeping claims under ERISA.

The court also rejected the claim for relief under ERISA’s “catchall” provision, 29 U.S.C. § 1132(a)(3). Essentially, it found that the plaintiffs had already asserted FLSA claims for overtime violations, and there was no need for an additional claim for equitable relief.

The court likewise dismissed the claim for alleged breaches of fiduciary duties under section 404(a)(1) of ERISA, 29 U.S.C. § 1104(a)(1). The court concluded that the crediting of overtime was a human resource, not a plan, function and that the defendants had not breached their fiduciary duties by not paying overtime. This conclusion was buttressed by the plan terms that relied upon amounts paid rather than overtime earned and by the fact that the plaintiffs were seeking primarily compensatory damages and not ERISA equitable relief. Incidentally, this is a critical ruling for employers – one can only imagine the problems employers would face if they had a fiduciary duty to monitor FLSA compliance in addition to their already heavy obligations under federal and state law.

Lastly, the court dismissed the ERISA claims to declare rights under section 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B). The court dismissed this claim for failure to exhaust administrative remedies.

The court also dismissed a claim for certification of the ERISA class as moot. That may or may not have been a good thing for the plaintiffs – ERISA claims are governed by Rule 23 and not FLSA section 16(b). If the court had denied certification under Rule 23, that likely would have emboldened the defendant as to its chances of success at the decertification phase of the FLSA collective action procedure.

The Bottom Line: Plaintiffs should not be able to bolster FLSA claims with derivative claims of ERISA violations.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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